Location: Phoenix-Mesa-Chandler, AZ | Metro: Phoenix-Mesa-Chandler, AZ MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,320 |
| 1 Bedroom | $1,420 |
| 2 Bedrooms | $1,640 |
| 3 Bedrooms | $2,170 |
| 4 Bedrooms | $2,400 |
| 5 Bedrooms | $2,784 |
| 6 Bedrooms | $3,118 |
| 7 Bedrooms | $3,367 |
| 8 Bedrooms | $3,535 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap-rate scenario for ZIP code 85172 reveals a distinct gap between the Federal Market Rent (FMR) and the actual market rent, which significantly impacts the gross yield potential for landlords and small-portfolio investors.
Annualizing the 2-bedroom FMR of $1570 for fiscal year 2024 suggests a yearly rental income of $18,840. However, the median home value for the area is not available, making it challenging to calculate an exact cap-rate. Nevertheless, using the FMR figure, we can infer a higher gross yield compared to the market rent.
In contrast, the Census ACS reported market rent for a 2-bedroom apartment at $944 per month, leading to an annualized market rent of $11,328. This lower figure implies a lower gross yield when compared to the FMR-based scenario. Given that the gross yield is derived from the rental income relative to the property's value, the absence of median home value data limits a precise cap-rate calculation but underscores the disparity between FMR and market rates.
The 52.6% renter density in ZIP 85172 indicates a substantial demand for rental properties, which could support higher rental rates. However, the lack of data on the average days on market (DOM) makes it difficult to assess how quickly properties might be rented out at the FMR versus the market rate. In practice, landlords should consider the balance between FMR and market rent, factoring in the local rental market dynamics and tenant preferences.
While the FMR-based gross yield appears more attractive, it is important to recognize that the actual market conditions, including competition and tenant eligibility, may influence the realistic yield. The market rent provides a baseline for what tenants are currently paying, suggesting that achieving the FMR rate could be challenging without a robust understanding of the local housing market and tenant needs.
Data Sources: FMR data from HUD (2027). Demographics from U.S. Census (2024).
About FMR: Fair Market Rent (FMR) is used to determine payment standards for the Section 8 Housing Choice Voucher program, initial renewal rents for some expiring project-based Section 8 contracts, and rent ceilings for HOME Investment Partnerships.